Nasdaq ready to venture into crypto custody service
Nasdaq ready to venture into crypto custody service
Crypto

Nasdaq ready to venture into crypto custody service

By Vincenzo Cacioppoli - 21 Sep 2022

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According to Bloomberg, Nasdaq is ready to launch a crypto custody service.

Nasdaq’s crypto custody service

According to a report by Bloomberg news agency, Nasdaq is reportedly ready to venture into the cryptocurrency market. Bloomberg claims that the first major step into the digital asset sector by the US tech stock market would be a Bitcoin and Ethereum custody service.

Nasdaq has reportedly already created a new group dedicated specifically to digital assets. As mentioned initially, custody services for Bitcoin and Ethereum will be offered to institutional investors, according to Tal Cohen, the company’s executive vice president and head of North American markets. Nasdaq, Bloomberg states in the article, has reportedly hired Ira Auerbach, who managed prime broker services at the Gemini cryptocurrency exchange, to head this very new Nasdaq Digital Assets unit.

This is an important first step toward an integration between two markets such as cryptocurrency and Nasdaq, which seem to have become increasingly interrelated over the past two years. The digital asset market is increasingly being affected by what is happening in the tech stocks market, which has lost 28% of its value since the beginning of the year, dragging the crypto market down with it. Now with this new custody service, which will probably soon be expanded to other cryptocurrencies, this close correlation between the two markets is also formally sanctioned.

Wall Street getting closer to the crypto world

It is no mystery that major financial firms on Wall Street also seem to have changed their attitude toward the cryptocurrency sector, starting with the two largest investment banks such as Goldman Sachs and JP Morgan. This is because, despite the fact that for years everyone viewed digital assets as purely speculative instruments with no intrinsic value, institutional investors’ interest in them has remained intact over time.

Now with new products, such as ETFs and derivatives, institutional investors, who were previously precluded by statute from these kinds of unregulated markets, have also entered the market. BlackRock Inc. for example recently partnered with Coinbase Global Inc. to make it easier for investors to trade Bitcoin and shortly thereafter offered its first investment product directly in the token.

Auerbach said in an interview: 

“We believe this next wave of the revolution is going to be driven by mass institutional adoption. I can think of no better place to bring that trust and brand to the market than Nasdaq.”

According to the Financial Times, this move by the world’s leading tech market would be a prelude to opening up to real trading in digital assets. All this despite the fact that the market has suffered a deep downturn in these first 9 months of 2022, which reduced capitalization by nearly $2 billion, with declines for all stocks, ranging from 50 to 80% of their value.

The failures of companies such as Terraform Labs, Celsius, Three Arrows Capital, and Voyager Digital, have then re-proposed the need to create serious regulation for a market, which has to deal with the difficulty of being subjected to the rules of traditional financial markets.  

And that is also why for now Nasdaq would limit itself to providing cryptocurrency custody services, and then later expand the range of services offered, which also do not exclude the creation of a real market for digital assets

In a recent interview, Cohen said: 

“Custody is foundational. Off the back of custody, we can start to develop other solutions, offer execution services, liquidity services, and think about how we support new markets.”

Nasdaq’s choice will be a boost for the entire industry

Many of the developments in this cooperation start precisely from the regulatory aspects of the cryptocurrency market, as reiterated in the same interview by Cohen, who also said how the approval of precise regulation of the sector, which has also been demanded for some time by crypto operators themselves, could provide excellent opportunities for the technology securities market as well.

Nasdaq, according to Auerbach, would also be open to exploring partnerships and deal opportunities with crypto-native companies, although it does not currently appear to have plans to make an acquisition in the near term. The team that is being formed is derived almost entirely from Nasdaq’s internal staff, but new specialized hires are not ruled out, to reach 40 people by the end of the year, Auerbach continued.

Nasdaq has also expanded the technology it offers to crypto companies related to protection and anti-crime software, in part via the company’s Verafin and Surveillance product, which can help investigate and report cases of money laundering, fraud and manipulation for banks and trading companies. 

Auerbach, who will be a vice president reporting directly to Cohen, also said that the market’s interest in blockchain technology would still be sustained in the cryptocurrency market, despite the flashy declines in recent months. “Distributed ledger technology is transformational for businesses, for finance and for the world at large,” he added.

Auerbach also said that Nasdaq is not at all afraid of the competition that exists on this type of cryptocurrency service because of its unparalleled expertise and institutional knowledge:

“We think we are in a unique position and have a right to win in that space both on custody and eventually building on top of that for other services.”

The same manager said that Nasdaq also has the appropriate knowledge to counter cyber crime, which is becoming increasingly prevalent in the crypto asset sector, with some $14 billion for criminal purposes being used thanks to cryptocurrencies, nearly double the previous year’s figure.

Vincenzo Cacioppoli

Vincenzo was born in Genova but lived most of his life in Milan. He has a degree in political science. He is a journalist, blogger, writer, and marketing and digital advertising expert. After a long experience in traditional marketing, he started working with the web and digital advertising in 2011, creating a company called Le enfants. Passionate about the web and innovation, in 2018 he started exploring the topics related to blockchain technology and cryptocurrencies. Independent cryptocurrency trader since March 2018, he now collaborates with companies in the sector as a content marketing specialist. In his blog. mediateccando.blogspot.com, he has long been primarily focused on blockchain, which he considers to be the greatest technological innovation after the Internet. His first book about blockchain and fintech is scheduled for release in November.

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